Pioneer and DoublePoint agree $6.4bn consolidation deal

June 2021 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

June 2021 Issue

In what is its fourth multibillion shale deal of 2021, energy company Pioneer Natural Resources is to acquire the leasehold interests and related assets of upstream oil & gas company DoublePoint Energy in a transaction valued at approximately $6.4bn.

Under the terms of the definitive purchase agreement, Pioneer will issue approximately 27.2 million shares of common stock in the transaction with an additional $1bn of cash. Pioneer plans to finance the cash portion of the purchase price through a combination of cash on hand and existing borrowing capacity under its revolving credit facility.

The acquisition is expected to result in annual cost savings of approximately $175m through operational efficiencies and reductions in general and administrative and interest expenses. The expected present value of these cost savings totals approximately $1bn over a 10-year period.

After closing, existing Pioneer shareholders will own approximately 89 percent of the combined company and existing DoublePoint owners will own approximately 11 percent.

Based in Fort Worth, Texas, DoublePoint Energy is led by the Double Eagle management team in partnership with FourPoint Energy. DoublePoint is backed by equity commitments from Apollo Global Management, Quantum Energy Partners, Magnetar Capital and GSO Capital Partners, LP.

“DoublePoint has amassed an impressive, high quality footprint in the Midland Basin, comprised of tier one acreage adjacent to Pioneer’s leading position,” said Scott D. Sheffield, chief executive of Pioneer. “We are pleased with their decision to become long term partners with Pioneer in a transaction that will complement our unmatched position in the core of the Permian Basin.”

Pioneer expects production from the acquired assets to reach approximately 100,000 barrels of oil equivalent per day by late in the second quarter of 2021. “We will incorporate these assets into our investment model, migrating the assets from significant production growth to a free cash flow model, moderating growth for the US shale industry and generating significant value for our shareholders,” added Mr Sheffield.

“We are proud and appreciative of the work that our team has done to build a company and an asset base that is unparalleled in quality and truly cannot be replicated,” said Cody Campbell and John Sellers, co-chief executives of DoublePoint Energy. “We are honoured to have the opportunity to combine our business with Pioneer, who we have long admired and regard as the premiere operator in the Midland Basin. The fit and the synergies are clear, and we look forward to working with Pioneer to continue creating value.”

The transaction has been unanimously approved by Pioneer’s board of directors and is expected to close in the second quarter of 2021, subject to customary closing conditions and regulatory approvals.

Geoffrey Strong, senior partner and co-head of infrastructure and natural resources at Apollo, concluded: “The combination of Pioneer and DoublePoint is compelling from both a financial and operational standpoint and a natural fit for DoublePoint. This acquisition continues the trend of consolidation in the prolific Permian Basin, combining two complementary footprints in a transaction with both top and bottom line synergies.”

Fraser Tennant